A new Fortune article might blunt that fear a bit.
For the past three years, at least, the huge credit explosion in China has overwhelmingly ended up in the hands of China’s state-owned companies. In the wake of the global economic crisis, Beijing’s state-owned banks have frantically shoveled money to their state-owned brethren in the hope of mitigating its impact (particularly on employment). …
… Given China’s economic success, why does credit allocation need to be overhauled? As Daniel Rosen, principal at the New York consultancy Rhodium Group, puts it: “China has the potential for a lot more growth, but it needs to come now from innovation — not more steel mills. The question is, Which ownership group [state vs. private] is capable of delivering that growth?” Most people feel it’s the private sector, which over time tends to be more efficient and more innovative than big, state-owned companies.
Of course, communist political leaders who promote “state capitalism” might have a hard time grasping the concept of private-sector superiority.
